Continuing my plan to give an extract from a chapter of the to-be-published third edition of the Guide to Organisation design, this week’s extract is from chapter 3 Organisational Structures. Next week I’ll pick up on the discussions the group I’m working with have had on organisational structures. NOTE that in the book I’ve equated structures with organisation charts as this is what people seem to do. But there are other views on what organisational structures are. See my blog on this.
Starting with the structure is not the best way to do OD but asking a range of questions about structures helps in making sensible structural decisions when the time comes in the design process. Useful questions include:
- How often and how much restructuring is necessary to keep ahead of competitors?
- What structures make for fast decisions and delivery of product or service?
- What structures will enable keeping up to speed or ahead of the curve with changes in customer and market requirements?
- What structures minimise bottlenecks without incurring risk?
Integration (size and shape)
- What structure will maximise the flow of knowledge and information through the organisation?
- What effect do particular structures have on the relationships among business units, divisions, headquarters, customers, suppliers?
- Does the way a department, business unit or organisation is structured get in the way of efficient and effective workflow?
- What is the best balance between centralisation and decentralisation?
- Does the structure allow everyone’s voice to be heard (high participation)?
Flexibility (role clarity)
- How will jobs and pay levels be described and classified to maximise workforce flexibility?
- What levels of autonomy, accountability and participation go with each of the potential structures?
- What are the job designs that go with each type of structure?
- How well do the relationships between individual departments and between departments and headquarters work?
Innovation (specialisation/organisation identity)
- What structure will best support the desired culture?
- What structure will best support organisational values?
- Does the organisational structure attract the best and the brightest staff (and help retain them)?
- Will structuring differently help develop the organisation’s market position and competitiveness?
- What structure would maximise the flow of knowledge and information through the organisation?
- How will the balance between local and central control be attained?
- How many layers of management make for effective and efficient control?
- What is the optimum span (ie, number of people any one person can supervise) of control in a given set of circumstances?
- How can structures be used to drive the desired/required behaviours?
- What should be the chain of command/decision-making?
- Who will report to whom and why?
Because the structure of an organisation is only one design element, there are no straightforward answers to these questions as each has to be answered in relation to the other organisational elements. However, comparing the structures starts to give some useful information on the relative capabilities of each. (In the book there is a table comparing capabilities of the structures).
Combining this information with the advantages and limitations of each structure (in the book there is a table showing this info) gives a reasonable start-point on which to base discussions about current structures and structural alternatives. Repeating a point made earlier, the thing to bear in mind is that even within one organisation there may be a need for several structures. For example, an internal audit function may require a different structure from a research and development group, which may in turn need a different structure from a marketing network.
Layers and spans
People in self-managing organisations do not have the same concerns with layers and spans that people in traditional hierarchical organisations have and it may be that discussions on them gradually fade away as traditional organisations evolve. However, for the moment it is still a live topic.
Layers in a traditional hierarchical organisation refer to the number of levels of staff there are from the most junior to the most senior – typically varying from 7 to 12. The trend is to reduce the numbers of layers by merging or removing them in order to place accountability at the lowest possible layer. A span is the number of employees that a single manager is responsible for, usually in terms of allocating work and monitoring performance. The relationship between spans and layers is not straightforward either, although wide spans of management are typical of organisations that have few layers.
There are two frequently asked questions related to structure to which people are anxious to get a ‘right’ answer:
- How many layers of management should there be?
- What is the right span of control?
Unfortunately, neither of these questions has one right answer. Layers and spans are structured to help managers get work done, so the first part of an organisational decision on the number of management layers and the span of a manager’s control requires discussions and agreement on what managers are there to do in what context.
In general, managers plan, allocate, co-ordinate and control to achieve what the late Peter Drucker described as their three tasks:
- To contribute to the specific purpose and mission of the enterprise.
- To make work productive and the worker achieving.
- To manage the social impacts and social responsibilities of the organisation.
Clearly, determining what configuration of layers and spans is likely to work in a given organisation depends on the situation, organisational purpose and a host of other factors related to the interpretation of what the three tasks entail and the weighting given to each of them. In general layers should:
- be flexible and adaptable enough to enable managers to forward plan in a context of constantly changing operating environments;
- facilitate co-ordination between business units including leveraging know-how; sharing tangible resources; delivering economies of scale; aligning strategies; facilitating the flow of products or services or information; creating new business;
- have appropriate control and accountability mechanisms (note that any task, activity, or process should have only one person accountable for it and accountability and decision-making should be at the lowest possible level in the organisation; overlap and duplication, fuzzy decision-making and conflict resolution processes are all symptoms of lack of adequate controls);
- enable its managers to allocate effectively the range of resources (human, time, equipment, money, and so on) they need to deliver their business objectives.
If these four attributes are working well, it is likely that the layer is adding value to the organisation, in that it is facilitating speed of operation, innovation, integration, flexibility and control. If it is not evident that the layer is doing this, it may be redundant and the reason for its existence should be questioned.
Determining a sensible span of control is possible (though infrequently done) both for an individual manager and for the type of work carried out in a business unit or organisation. The method involves considering, the diversity and complexity of the work, the experience and quality level of the workforce, the extent to which co-ordination or interdependence is important between employees and groups, the amount of change taking place in the work environment, the extent to which co-ordinating mechanisms exist and are effective, the geographic locations of the workgroups, the extent to which job design and tools allow direct performance feedback to the employee, administrative burdens on each level of management, and expectations of employees regarding development and career counselling.
Reflective questions: What is the design impact of de-layering an organisation? How do span considerations relate to size of a self-managing team? (Note: The reflective questions are a new addition to the book. I am how useful people will find them?)